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Insurer fails in aggregation argument over partner’s multi-million pound thefts

Box: Dishonesty a state of mind

The High Court has refused to aggregate as one claim various actions a Yorkshire law firm’s indemnity insurer is facing because of a multi-million pound fraud run by one of its partners.

His Honour Judge Saffman in Leeds, sitting as a High Court judge, ruled that the claims [1] “do not have a sufficient interconnection or unifying factor” to engage the aggregation clause in the policy, which was in line with the Solicitors Regulation Authority’s minimum terms and conditions (MTC).

HDI Global Speciality (formerly Hannover) argued that the actions of Linda Box constituted either “one act or omission” or “one series of related acts or omissions”, meaning it would only have to pay out a maximum of £2m in relation to all claims made against Wakefield firm Dixon Coles McGill, rather than a maximum of £2m for each claim

Linda Box, who was senior partner of the three-partner firm, pleaded guilty [2] in 2017 to nine counts of fraud, two of forgery and one of theft, and was sentenced to seven years in prison.

Over the course of 12 years, she stole at least £4m – and maybe as much as £10m – mainly from estates, to fund a lavish lifestyle. She was dubbed ‘Gangster Granny’ by the media at her trial.

The Solicitors Regulation Authority shut down the 200-year-old firm in April 2016 in the wake of Box’s two partners uncovering the fraud. There is no suggestion that they knew what was happening. She was struck off the same year.

There are two claims being brought against the other partners, the firm and its insurer, which are being case managed together but have not been joined.

The claimants in one are Guide Dogs for the Blind Association, Yorkshire Cancer Research, the British Heart Foundation and the National Trust – as beneficiaries of an estate that Ms Box plundered – and in the other the Bishop of Leeds and the Leeds Diocesan Board of Finance on behalf of the church, which was a client of the firm.

In his second preliminary ruling in the case [3] in recent weeks, HHJ Saffman said he could not accept that the claims arose from one act or omission, borrowing a house-building analogy from HDI’s counsel, Michael Pooles QC (instructed by DWF).

“On any basis it is difficult to see how the actions of Mrs Box, perpetrated over a number of years can be seen to be one act,” he said.

“It is right that, with regard to building a house, several steps may be intended to result in that one act of building a house but this situation is much more analogous to the building of a whole housing estate.

“If I may put it thus, the acts intended to build 1 Acacia Avenue cannot sensibly be seen as acts intended to build 2 Acacia Avenue.

“The building of each house is a different act. There may be a single intention to build a housing estate in the same way that Mrs Box may have had the single intention of stealing as much money as possible but each house, and each theft, must, in my judgment, be a different act although they may be taken with a view to accomplishing one ultimate objective.”

Similarly the judge rejected the submission that the thefts were one series of related acts, saying there was not a “sufficient interconnection or unifying factor”, even if there was “wholesale teeming and lading” – this phrase described how Ms Box used other clients’ money to fill what she had stolen and hide what she was doing.

He explained: “It was not Mrs Box’s dishonesty which was the proximate cause of their loss… Dishonesty is not an act, it is a state of mind.

“What caused these claimants’ losses were the individual thefts from them. True it is that these were motivated by dishonesty but it is the ‘acts’ that matter, not the motivation for the ‘acts’.

“These acts resulted in different losses to different clients. There cannot, in my view, be said to be a single loss because I am satisfied that the acts of theft were not related on a proper construction of [the MTC].”

Further, HHJ Saffman said there was insufficient interconnection between the acts – that they were all committed by the same person “and perhaps concealed by the same process” were not enough.